NAHB Report Finds Small Builders Are the Mainstay of the Housing Industry

According to a new study by the National Association of Home Builders (NAHB), small homebuilders are the mainstay of the nation’s housing industry, including a sizable number of self-employed operations.

“Small businesses have always been the predominant force in housing, and they lend this industry its economic vitality,” said Bob Jones, NAHB chairman. “We are seeing market conditions returning to normal in many parts of the country after a long, hard downturn, and these companies have the agility to move quickly and start leading the economy forward,” Jones said.

The study notes that the small builders and tradesmen who produce the majority of the nation’s new homes “compete in a fierce marketplace that challenges their economic survival. A much higher share of small businesses both enter and fail in the residential construction industry when compared to all U.S. firms,” according to the report.

The report said that the residential construction industry is dynamic in that many new firms enter the industry each year, while many firms close. The report credits the dynamic nature of the industry to the ease with which a homebuilder can start up. All it takes is a single new home.

Also according to the report, the majority of homebuilders and remodelers are small businesses, which are easily able to enter the industry when conditions improve and exit either because of business failure or life-cycle decisions.

The report concludes that housing remains the domain of small businesses and looks at the Census Bureau’s Economic Census, which provides information on the size of businesses in various industries.

The NAHB conducts the study every five years, and the most recent census is based on business activity that occurred in 2007.